From AIACC -- Possible Proposal to Change Business Tax

To the AIACC Advocacy Advisory Committee,

 

I am writing to ask for your opinion on what could be a proposal to change business tax law and that could be considered by the California Legislature in late September.  The proposal is preliminary now – details are missing – and you may want to run this by your tax attorneys or accountants for their thoughts.

 

You may know that the Governor and legislative leaders appointed the Commission on the 21^st Century Economy to study our tax system, and to recommend changes to modernize it and stabilize its revenue.  The Commission is working to make and present its recommendations very soon.  The Governor has announced his intention to call the Legislature into special session to vote on it.  It is quite possible the Commission will not be able to submit an unanimous report, or even a majority report – the Commission appears to divided.  This, of course, would affect the ability of the Legislature to approve any change.  Nevertheless, a proposal is on the table that would affect businesses – a Business Net Receipts Tax (BNRT).

 

The BNRT is a value-added tax that would apply to business activity, including services.  It is not a sales tax on services as it does not apply on a transaction basis.  Links to an overview of the BNRT and a limited analysis of it (answers to two specific questions) are below.

 

When considering the ramifications of a BNRT on your firm, please consider it as part of a larger package.  Right now, the items below are being considered as part of that package.

·         Eliminating or lowering the corporate tax

·         Eliminating or lowering the state portion of the sales tax

·         Lowering to state income tax to a flat rate, or to two rates

·         A carbon tax is also being considered

 

And please consider it in comparison to a sales tax on services, as some continue to call for that.

 

Here are the links to more information.

 

Preliminary Overview of BNRT

http://www.cotce.ca.gov/meetings/documents/FINAL%20-%208%2021%2009%20-%205%2000PM%20-%20BNRT%20Des9.pdf

 

Limited Analysis of BNRT

http://www.cotce.ca.gov/documents/correspondence/staff_and_commissioners/documents/FTB%20Analysis%20for%20COTCE%20-%208.21.09.pdf

 

Please feel free to call or email me if you have any questions.

 

Anything you can do to help us understand how this would impact your firm as a stand-alone proposal, as a part of package of changes, and as compared to a sales tax on services is greatly appreciated.

 

Best,

 

Mark Christian, Hon. AIACC

Director of Legislative Affairs

AIA California Council

Direct: 916-642-1708